How a Small USDA Program Helps Small Farms and Local Food Economies

In 2012, Luisa Conrad and Lucas Farrell left their small herd of free-range goats at Big Picture Farm in Southern Vermont to attend the Fancy Food Show, a massive display of specialty foods where distributors and members of the media sample innovative products. As owners of a small farm, they felt out of place among big food retailers, but the quality of their caramels prevailed: they won a top award at the show, and orders began pouring in.

“That was really such a game changer for us in terms of the trajectory of our business. We got huge orders that forced or allowed us to really ramp up the scale of our business pretty quickly,” Conrad said. “I remember thinking, ‘Okay, we’re going to be able to hang in there and do this.’”

The entire opportunity was made possible via a Value-Added Producer Grant (VAPG) from the United States Department of Agriculture (USDA). Without the grant, Conrad said, the cost of the show would have been prohibitive, and they wouldn’t have been able to hire someone to stay at the farm while they marketed their caramels.

Stories like this one are common. Across the United States, the VAPG program is especially popular among farmers running small operations that sell into local markets. Operating a small farm is a tough business with razor-thin margins, and since the grants enable farmers to process what they grow into higher-cost products themselves—rather than selling to a middleman—the farmer is able to capture a greater percentage of the food dollar. The program’s successes over the years have been anecdotal, but there is now real evidence that supports its approach: A recent USDA study found businesses that received the grants were significantly more likely to succeed compared to similar businesses that did not. VAPG businesses also created more jobs than their counterparts who did not receive grants.

Despite those promising findings at a time when farmers in the US are facing unique economic challenges, the VAPG program is currently in limbo due to the delay of the Farm Bill—and depending on the outcome of negotiations, it could be wiped out entirely.

A Lifeline for Farmers

The Value-Added Producer Grant program was first created in 2000 as part of a crop insurance and risk management bill and was later folded into and reauthorized in the 2008 and 2014 Farm Bills. As a program of the USDA’s Rural Development (RD) mission area, its overarching aim was to “help rural communities create prosperity.”

“Part of the reason the program was created was in response to times that were similar to what we’re facing now, in which we had a prolonged depression with the farm economy,” explained National Sustainable Agriculture Coalition (NSAC) senior policy specialist Wes King. “It was created as an alternative form of risk mitigation for farmers.”

At the time, it was primarily presented as a way to help commodity growers facing low prices. If they could diversify their crops and capture more of the food dollar, they’d be less dependent on fluctuating commodity prices. In the early days, many used the grants to process corn into ethanol.

Over the years, it morphed into a program utilized primarily by smaller farms, and the farm businesses that have benefitted from the grants are incredibly diverse. Examples include dairy farmers making cheese in Wisconsin, hops growers making beer in New York, barley producers expanding their local consumer base in Alaska, ranchers packaging grass-fed beef in Colorado, and oyster producers marketing their sustainable local shellfish in Maryland. Overall, between 2001 and 2015, the USDA distributed 2,345 grants for a total value of US$318 million.

Evaluating the Evidence

In May 2018, the USDA released the most comprehensive study to date on the VAPG program. To conduct the study, agricultural economists at the Economic Research Service used data linking to compare businesses that had received the grants to similar businesses that had not.

The researchers found grant recipients were 89 percent less likely to fail two years after receiving the grant compared to the group of similar non-recipients. Recipients also hired five to six more workers (an average of about 40 percent), than non-recipients one to five years after a grant was received.

“We finally got the research that showed what many people knew—that it’s quite effective and a good investment,” King said. “[The research] basically showed that this program is doing what it’s supposed to do, and it’s doing it in an effective and efficient matter. It’s helping rural communities create jobs and viable economic enterprises that they wouldn’t have been able to otherwise.”

In Georgia, for example, a group of farmers operating small, diversified farms were looking for ways to expand their income beyond selling at the Athens Farmers Market. They created Collective Harvest, a multi-farm collective that operates a CSA (Community Supported Agriculture) for local residents and sells to restaurants in the area.

To get the operation off the ground, one of Collective Harvest’s founders, Shelley Dodd—who owns Diamond Hill Farm with her husband, Carter—applied for a Value-Added Producer Grant. The group was awarded just under US$50,000 in 2015.

“The first year, one of the farmers was putting together all of the orders for the produce. The second year, we hired someone to do it for us using those funds, and we were able to bring in two more farms. We also expanded shares,” Dodd said. In subsequent years, Collective Harvest also applied for and received a Farmers Market Promotion Program (FMPP) grant. With the help of both programs, the number of local families purchasing their CSA shares annually has more than doubled, from 223 members in 2015 (before the VAPG funds) to 527 in 2018. And Dodd said Diamond Hill Farm’s income from Collective Harvest is now equal to the income the farm makes at the market.

The VAPG Program’s Uncertain Fate

During the week of November 12, more than 100 young farmers arrived in Washington, DC for the National Young Farmer Coalition (NYFC)’s annual conference, and during a lobby day on Capitol Hill, they talked to their representatives about how various federal programs—VAPG prominent among them—had helped them succeed.

“We have a number of farmers in our network who have used it and benefited it from it. It’s one of those small programs that has had a pretty outsized impact,” said Andrew Bahrenburg, NYFC’s National Policy Director. “That’s one reason why we’ve strongly gone to bat for it.”

NYFC is one of many other organizations, including NSAC, fighting to keep the VAPG program alive as the 2018 Farm Bill negotiations continue. When the 2014 Farm Bill expired on Sep 30 because Congress failed to pass a replacement, VAPG was one of several programs that was essentially put on pause indefinitely, because it is was too small to qualify for what is called “permanent baseline funding.”

Now, negotiations continue, and when a final Farm Bill does pass, it’s unclear whether VAPG will be brought back to life. In the House version of the bill, mandatory funding for the program is eliminated entirely. The Senate version, on the other hand, strengthens the program by wrapping it into a new program dubbed the Local Agriculture Market Program (LAMP). By combining Value-Added Producer Grants with the Farmers Market Promotion Program and the Local Food Promotion Program, LAMP would ensure that all of these programs are eligible for permanent baseline funding in the future. In other words, if future Farm Bills were delayed, grants would not be put on hold while legislators worked out the details of the next bill.

“These small stranded programs are not going to make or break the Farm Bill and they’re not grabbing the headlines. That’s in part due to their scale relative to other programs,” Bahrenburg said, but the fact that VAPG is one of the few programs that does support small, regional food producers is exactly why it’s so important, he and other advocates argue.

“Programs like VAPG that are investing in small and medium size operations are one tool—it’s a small tool compared to commodity programs, but it is one tool—that’s helping to stem the tide of consolidation and the continued hollowing out of rural communities,” King said.

In Vermont, the Value-Added Producer Grant was so helpful, Conrad applied for a second in 2015 and was able to hire additional workers and create new products, like a line of organic chocolate goat milk caramels.

“One of the things that’s tricky as a small farm is that your returns are never going to be sexy enough to have an investor,” she said. “It’s such a daunting landscape. The VAPG has just been vital in…allowing a small-scale farm to do its thing as opposed to getting huge. It just changes the nature of what’s possible.”

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Lisa Elaine Held is a freelance journalist based in New York City who covers the food system. She focuses on stories that show how what and how people eat intersects with environmental issues, health, culture, and social justice. Her work has been published in various magazines and on many websites, including Civil Eats, Eater, Tasting Table, Cosmopolitan, and Conde Nast Traveller. She has a master’s degree from Columbia University’s Graduate School of Journalism and was formerly an editor at Well+Good.